IN celebration of Christmas Jan. 7 in accord with the Ethiopian calendar, priests at the Balewold Orthodox Church, wearing elegant robes and hats and shaded by umbrellas, slowly circled the outside of the building three times.
In another old ritual, beggars, some deformed, made their way slowly through the dense crowd of faithful men and women gathered around the church, collecting coins in their open palms.
Against a background of rich traditions, and a mix of extreme poverty and relative affluence, Ethiopia's new rulers are trying to modernize this ancient country.
Thirty years of war and 17 years of Marxist policies have left Ethiopia one of the world's poorest countries. Infrastructure is in tatters. But while many serious problems remain and urban residents complain life is getting harder, the young Ethiopian government has accomplished major reforms in the past 20 months, according to the World Bank and United States diplomats.
Despite their history of advocating Marxism and Socialism prior to taking power, the rebels who in May 1991 ousted dictator Mengistu Haile-Mariam have steered Ethiopia toward a free market economy.
Some of the initial market reforms target:
* Agriculture. Farmers for the first time are now free to sell crops anywhere, at any price. Previously, they had to sell a significant share of their harvest to the Mengistu government, usually at below-market prices. The new government also offers farmers the option of a minimum guaranteed crop price.
The United Nations Food and Agriculture Organization says higher crop prices have led farmers to plant more acres. This, along with the end of the civil war and good rains, have produced what is likely to be a record crop, now being harvested.
* Transportation. Truckers for the first time may travel anywhere and charge any price, without the hindrance of tariff- and bribe-collecting road barriers and other state restrictions.
Though in the short run this may push up transportation prices, in the long run, US officials say, prices are likely to fall again as the number of truckers competing for business increases. Free movement of trucks is seen as a key to moving food quickly from fields to markets in a country where people have starved in one region while there were surpluses in another.
In a vote of confidence for the economic reforms already made and additional ones planned, Western donors held a joint meeting on Ethiopia in Paris in November, their first since 1974, approving $1.2 billion in aid for use by June 1994.
The aid will help pay for imports and development and recovery projects, and will help to ease a "very precarious budget situation," says one Ethiopian economic official.
Senior officials in the ruling Ethiopian People's Revolutionary Democratic Front (EPRDF) say the first economic priority is development - the rebuilding of roads, schools, clinics, and hospitals destroyed during the war.
The government is planning to sell off some of the many state-owned companies, and is trimming its bloated civil service.
"In some offices there were 60 typewriters and 300 secretaries," says Gilma Kidane, an Ethiopian Red Cross official working on a government program to rebuild war-damaged areas.
"These are extraordinary changes," says Willard Pearson, director of the US Agency for International Development program in Ethiopia.
But existence is still difficult for the more than 80 percent of the population who are farmers, typically earning only about $100 a year on less than three acres of land, Mr. Pearson says.
Many Ethiopians grumble over higher living costs resulting from the Oct. 1 devaluation, by 58.6 percent, of the birr. Import prices shot up, but so did the price of domestic food and other items transported with imported fuel.
Laid-off government employees find it difficult to feed their families. Many of the 500,000 former soldiers of the Mengistu Army, now demobilized, are jobless and landless.
The government also has not moved completely to a market economy. The EPRDF has retained state ownership of land and key industries, including mining and communications.
Alemseged Amlak, a senior government official, says this reflects the reality of the EPRDF's broad mix of people, "from priests to communists."
Mr. Alemseged says the government wants to avoid continued economic domination by "the old ruling class," - the elite Amhars of central Ethiopia, who governed for about a century.
"We should create real change in the life of the peasant," Alemseged says.
The government retains title to land, he says, to prevent the Amhars from buying up farmland and forcing landless farmers to flood the cities, and thus increasing urban joblessness.
"We want to get rid of [economic] restrictions without hurting the social fabric," says Teffera Shaiwl, acting head of press and information in the Ministry of Foreign Affairs.